LINK Mobility Group Holding ASA Interim Financial Report Second Quarter 2021
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LINK Mobility Group Holding ASA Interim financial report Second Quarter 2021 1 Highlights Second Quarter • LINK transformed from European CPaaS provider to global CPaaS player with footprint in the US as well as Latin-America and Asia-Pacific including Soprano • Delivered on M&A strategy as communicated in the IPO with 5 closed acquisitions • Pro forma* LTM revenue and adjusted EBITDA of NOK 4 362 million and NOK 622 million respectively. Soprano will add an additional NOK 683 million and NOK 182 million in revenue and adjusted EBITDA • Pent-up demand as societies reopen, increasing organic revenue growth in local currency to 23% • Pro forma* net retention rate of 123% in local currency • Reported adjusted EBITDA at NOK 119 million, an increase of 22% • Diverse customer base of 44 000 accounts with extensive cross-selling opportunities • Launched an additional significant WhatsApp agreement for customer service dialogue with Deutsche Post Total operating revenues (mNOK) Adjusted EBITDA (mNOK) NOK million NOK million Customer accounts Pro forma net retention rate in local currency Enterprise clients Group * Pro forma includes historical financials for acquired entities WebSMS, Tismi, MarketingPlatform, AMM and Message Broadcast for comparable data 2 Copyright 2021 LINK Mobility. All rights reserved. Global CPaaS player in high growth markets LINK Mobility (LINK) reports revenue growth of 26% to NOK 1 055 million in the second quarter of 2021. Organic revenue growth in local currency was 23%, above the medium to long term growth target due to catch-up effects from reopening of societies. Adjusted EBITDA reported at NOK 119 million with a stable margin of 11%. LINK closed several acquisitions in the quarter, including Message Broadcast in the U.S., resulting in pro forma LTM Q2 21 revenue and adjusted EBITDA of NOK 4 362 million and NOK 622 million, respectively. LINK reiterates its forward-looking statement which targets NOK 10 billion in pro forma revenue by 2024 and increases the adjusted EBITDA margin range to 15-17% from 13-15%. The acquisition of Soprano is progressing, and SPA is expected to be signed shortly. Including Soprano, pro forma LTM Q2 21 figures would be NOK 5 045 million and NOK 804 million for revenue and adjusted EBITDA, respectively. LINK is experiencing accelerated demand for CPaaS solutions and saw its most successful quarter ever on OTT traffic. WhatsApp traffic increased around 5 times from end Q1 21, while RCS traffic more than doubled from March to June. Clients increasingly demand new use cases built around the richer feature set of OTT channels and RCS, on top of existing SMS traffic. LINK recently signed an additional significant WhatsApp agreement for customer service dialogue with Deutsche Post. Organic revenue growth in local currency was 23% year over year, positively affected by the reopening of societies as enterprises are re-engaging activities towards end-users, leading to a catch-up effect from the softer volume development experienced both in Q1 21 and Q2 20. LINK’s pro forma revenue for Q2 21 reported at NOK 1 130 million, with pro forma organic growth in local currency at 25%. The Enterprise segment generated 20% pro forma organic growth in local currency as all product categories, regions and customer segments exhibited strong growth momentum. Aggregator revenue contributed to 5 percentage points on total organic revenue growth. Gross profit grew 22% to NOK 268 million compared to the same quarter last year. The gross profit margin declined slightly to 25% (26%), reflecting a higher portion of revenue from the low margin aggregator segment and customer mix effects. The lockdowns last year resulted in unusual volume variations favoring the higher margin public and logistics sectors in the more profitable Nordic region. Reported growth in adjusted EBITDA was 22% to NOK 119 million. The adjusted EBITDA margin was stable year over year at 11%. Cost reduction initiatives, implemented due to pandemic uncertainty last year, supported the Q2 20 adjusted EBITDA margin with approximately NOK 10 million. Messaging volumes increased 37% in the second quarter to 3 337 million compared to the same quarter last year, of which 28% organically. Pro forma messages delivered increased by 30%. Million messages / Price per message in NOK Pro forma Messaging volume in million 3 Copyright 2021 LINK Mobility. All rights reserved. Acquisitions and pro forma LINK acquired Message Broadcast in the US, MarketingPlatform in Denmark and AMM in Italy in Q2 21. The closing of these acquisitions, in addition to the closing of WebSMS in November 2020 and Tismi in March 2021, affects the pro forma financials of the group. The tables below show updated pro forma figures (full-year effect of closed acquisitions) for Q2 21 and LTM Q2 21 in reported currency. The financials are based on management estimates given the information available. Soprano figures are shown for completeness. NOK million Forwarding looking statement reiterated LINK benefits from strong market trends with accelerated demand for advanced CpaaS solutions and products. As LINK invests more in additional go-to-market (GTM) initiatives and launches new products in the current footprint, we expect demand for our products to grow even further. LINK is also executing on its M&A strategy with 5 acquisitions closed since the IPO in October last year. The continuation of underlying trends and progress on M&A enable LINK to reiterate its forward-looking revenue statement and to increase its forward-looking margin statement to reflect the acquisition of high margin Message Broadcast. Upon the closing of Soprano, the forward-looking adjusted EBITDA margin statement is expected to be raised further to 18-20% as previously indicated. New contracts and market trends During Q2 21, LINK added an estimated annual revenue contribution of NOK 67 million from 420 signed direct customer contracts, 33 signed partner framework agreements and 145 new partner customers. LINK sees great demand for multi-channel mobile communication and our enterprise grade CPaaS solutions. Companies increasingly demand new advanced use cases built around OTT’s and RCS channels on top of existing SMS traffic. In Q2 21, LINK saw its most successful quarter ever on traffic outside SMS. WhatsApp traffic increased around 5 times from end Q1 21, while RCS traffic more than doubled from March to June. LINK signed an additional significant WhatsApp agreement for customer service dialogue with Deutsche Post in the quarter. LINK is also rolling out WhatsApp globally through DHL’s footprint as part of a cooperation with DHL’s centralized Digital Assistant program. 4 Copyright 2021 LINK Mobility. All rights reserved. Financial Review (Figures in brackets refer to the same period last year) Group income statement Operating revenues amounted to NOK 1 055 million (NOK 841 million) or a reported growth of 26 percent versus same period last year including acquisitions. Message Broadcast will be consolidated into the Group profit and loss statement from July 1st. Organic revenue growth in local currency was 23 percent, currency translation negatively affected reported organic revenue growth in NOK with 8 percentage points. Aggregator revenue experienced a step-up in the current quarter, contributing to 5 percentage points increase in organic revenue growth in local currency. The growth in revenue from the aggregator segment was mainly due to reopening of societies and ad hoc volume increase for certain destinations. Total operating revenues (mNOK) Messaging revenue (mNOK) NOK million NOK million Reported Gross profit of NOK 268 million or a growth of 22 percent. Gross profit margin was 25.4% in the current quarter, a decline of 0,8 percentage points mainly due to; • traffic mix in the second quarter last year towards the more profitable logistics and public sector related to changes in usage caused by the initial lockdowns • higher portion of revenue deriving from low margin aggregator segment in current quarter Total operating expenses amounted to NOK 149 million (NOK 123 million) or a growth of 13 percent. In the second quarter of 2020, temporary cost savings initiatives were implemented as a response to the uncertainty of the initial lockdowns reducing operating expenses with NOK 10 million. All cost saving initiatives were stopped in the beginning of the third quarter last year, and LINK continued investing in growth within the enterprise segment resulting in moderate expansion of operating expenses in following quarters. Adjusted EBITDA, before non-recurring cost, was reported at NOK 119 million (NOK 98 million) or 11 percent of total revenues in line with same period last year. Year over year comparison was impacted by the increased profitability same period last year due to the temporary cost savings. Gross profit to adjusted EBITDA conversion was stable at 44%, comparisons with same quarter last year also impacted by the temporary cost savings. Gross Profit and margin Adjusted EBITDA and margin NOK million NOK million 5 Copyright 2021 LINK Mobility. All rights reserved. EBITDA after non-recurring items was reported at NOK 38 million (NOK 87 million) after deduction of non-recurring cost of NOK 81 million (NOK 11 million) related to acquisitions, share option program and restructuring costs. The increase in non-recurring costs was related to management share-option program launched in October 2020 in connection with the IPO and increased costs related to higher M&A activity compared to same period last year. Second quarter depreciation and amortization was NOK 69 million (56 million). The increase was attributable to depreciation of certain assets categories related to PPA for closed acquisitions and internal R&D. In the second quarter, net financial expenses were NOK 22 million (net financial income NOK 57 million). Comparison to the prior year is skewed by the implementation of hedge accounting from the first quarter this year. Net interest expense was NOK 32 million less than the comparative period due to lower interest-bearing debt and refinanced debt facilities at improved terms.